Open to acquisitions in renewable if valuations are right: JSW Energy Jt MD

In a Q&A, Prashant Jain says his firm plans to raise its green energy capacity from 32% now to 55% in two years

JSW Energy, which is betting big on green energy, proposes to increase its renewable energy capacity from around 32 per cent now to 55 per cent in the next two years, Prashant Jain, joint managing director and CEO of the company, said in a conversation with Viveat Susan Pinto. The company's thermal-based capacity, which is 68 per cent of its total installed capacity currently, will fall to 45 per cent in the same period. Jain highlights the building blocks the company is putting in place to achieve this target.

What makes you bet on the renewable energy sector even as 70-75 per cent of India's electricity generation is accounted for by coal-based power plants?

The answer to this lies in the growth prospects for renewable energy. Over two-third of India's electricity generation currently is coal-based, but this is not sustainable. The current power crisis in the country bears this out quite clearly. The future is renewable energy, especially in view of India’s commitment at COP26 of reaching net-zero emissions by 2070 and a target of achieving 500 Gw of non-fossil fuel-based energy capacity by 2030. Our priorities are clear that growth is in renewable energy, not thermal energy.

While setting up renewable energy power plants is one part of your strategy of growing your green energy base, are you open to acquisitions in the sector?

Yes, we are open to acquisitions in all areas including wind, solar and hydro energy, but the valuations have to be right. Given the interest shown by multiple players in green energy, valuations quite often become unsustainable for assets on the block. We are cognizant of this and want to be realistic when considering acquisitions. Having said that, we are already constructing 2.25 gigawatts (GW) of greenfield renewable energy capacity, which should come on stream in the next 12-18 months. As we go forward, the share of renewable energy capacity in our portfolio will continue to increase in line with our growth strategy.

How do you propose to fund this capacity expansion? Will capital expenditure (capex) grow with your push into renewable energy?

We will be spending between Rs 8,000-10,000 crore in capital expenditure every year as we grow our presence in renewable energy. Right now, with the 2.25-Gw greenfield renewable (energy) capacity under construction, capex is higher. We have a capex plan of nearly Rs 16,000 crore approved by the board for this capacity expansion. So far, Rs 9,600 crore has been committed of this capex plan, the balance will be committed in the current financial year. After that, we will be spending Rs 8,000-10,000 crore annually on capital expenditure.

How do you propose to fund your capex of Rs 10,000 crore in the future?

It will be a mix of internal accruals and debt. We generate Rs 2,500 crore of cash profits annually, which be utilized for capex. The balance of Rs 7,500 crore will be financed via debt.

Recently, the Power Ministry met producers stuck with plants that are non-operational. The argument these companies present is that they can do little to restart operations with no long-term power-purchase agreements, fuel linkages and debt restructuring. How do you view this scenario?

This argument holds true for older power plants, set up between 2009 and 2014. In recent years, this trend has reversed. No one sets up a power plant today, whether thermal or renewable, without long-term power purchase agreements. It is simply not viable. Similarly, the fuel linkage, especially, in the case of thermal power plants, has to be there. Otherwise, running the power plant will not be possible.